TaxTMI 
TaxTMI 
2008 (10) TMI 616
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....ry is not applicable to expansion units covered under 1993 Package Scheme of Incentives, when it was not asked for by the applicant (appellant sic) and their prayer was simply to delete the conditions from the certificate of entitlement? The application is admitted on the aforesaid questions of law and by consent of both sides, the application is allowed and the sales tax application itself is treated as statement of the case drawn by the Tribunal and is heard on merits on the aforesaid questions of law. The relevant facts are that the respondent (hereinafter referred to as, "the assessee") is engaged in the manufacture and sale of cotton/synthetic yarn at its unit situated at Jamb, Taluk Samudrapur, District Wardha and is duly registered under the provisions of the Bombay Sales Tax Act, 1959 ("the BST Act", for short) as well as the Central Sales Tax Act, 1956 ("the CST Act", for short). It may be noted that the State Government, with a view to achieve dispersal of industries outside the Bombay-Thane-Pune belt so that new industries with maximum capital investment get attracted to the backward areas, has announced from time to time since 1964 a scheme known as "pac....
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....missioner of Sales Tax, however, incorporated the following two conditions (i) and (m) which read thus: "(i) It is claimed by the unit that separate accounting production of goods related to each eligibility and entitlement certificate is difficult to maintain and as such the request is made for pro rata basis of investment as a criterion to claim the benefits in terms of the provisions contained in the 1993 package scheme. (m) Since the unit claims identification and maintenance of accounts for production from existing unit in first expansion is difficult to comply with, the option exercised by them within the provisions of the package is of pro rata basis of investment for computation of proportionate benefits. It has given following basis: (1) Gross block of fixed capital assets as on March 31, 1997 stands at Rs. 593.29 lakhs. (2) Investment towards capital assets in first expansion Rs. 884.00 lakhs. The total investment is (1) + (2) = Rs. 1477.29 lakhs. The pro rata benefits in first expansion = It would thus be clear that from January 1, 2000, onwards the production to the extent of 59.84 per cent of the total production shall be available fo....
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....h of the Tribunal held that the reference application was maintainable. Thereafter, the reference application filed by the applicant was heard and by the impugned order dated April 13, 2007 the Tribunal rejected the reference application, inter alia, on the ground that no referable questions of law arise from the order of the Tribunal dated March 17, 2001. Hence the above application is filed by the applicant which is treated as statement of the case and heard on merits by consent of the parties. The short question to be considered herein is, whether the Deputy Commissioner of Sales Tax was justified in imposing conditions (i) and (m) in the entitlement certificate so as to place ceiling on the utilization of the quantum of incentives proportionately to the extent of 59.84 per cent of the total quantity of finished products produced per year till exhausting the incentives quantified under the 1993 scheme or till the date specified therein, whichever is earlier. It is pertinent to note that the 1993 Scheme was initially made applicable only to the new units/pioneer units/prestigious units established in the backward area. However, para 3.8(I)(i)(c) of 1993 scheme reads as f....
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.... existing units acquiring new fixed assets not less than 25 per cent of the gross fixed assets became entitled to the incentives under the 1993 scheme irrespective of the fact that the acquisition of the new fixed assets resulted in increase in the production capacity or not. However, in such cases, the quantum of incentives was limited to 75 per cent of the incentives available to a new unit in the relevant area and for the relevant category of units. Thus, as per the newly inserted para 3.8(I)(i)(c) of the 1993 scheme, the eligible units were required to obtain a separate eligibility/entitlement certificate from the SICOM/sales tax authorities with the quantum of incentives which the existing unit is entitled to and the period within which those incentives could be availed. Neither para 3.8(I)(i)(c) nor any other provision under the 1993 scheme nor any provision under the BST Act/CST Act provides for utilization of the incentives in each year proportionately on the finished products attributable to the fixed assets newly acquired by the existing unit. In these circumstances, the question to be considered is, whether the Deputy Commissioner of Sales Tax after determining the qu....
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....on of new fixed assets and not increase in the production capacity. If increase in the production capacity is not the criteria for grant of incentives under the 1993 scheme, then there is no question of availing of the quantum of incentives under the 1993 scheme proportionately to the products attributable to the newly acquired fixed assets. In the present case, admittedly, the acquisition of new fixed assets has not resulted in increase in the production capacity of the existing unit. In such a case, the question of availing of the incentives on the finished products attributable to the newly acquired fixed assets does not arise at all. It is pertinent to note that para 3.8(I)(i)(c) as it stood originally, did provide for availing of the incentives by a unit acquiring new fixed assets outside the project scheme on proportionate basis. However, that para has been substituted with effect from July 6, 1994 and in the newly substituted para 3.8(I)(i)(c) the provision for availing of the incentives on proportionate basis has been completely omitted. Thus, the 1993 scheme as amended in 1994 makes a specific departure from the earlier schemes and provides for availing of the incentive....
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.... of the conditions in the entitlement certificate. As noted earlier, for grant of incentives under the 1993 scheme, increase in production is not the criteria. In fact, rule 31B itself provides for availing of the incentives on sale of finished products manufactured by an eligible unit within the prescribed monetary limit and the time-limit. Moreover, rule 31B does not provide for availing of the incentives under the 1993 scheme in proportion to the production attributable to the newly acquired fixed assets. In these circumstances, the Deputy Commissioner could not have directed that the incentives be availed of on pro rata basis by following an artificial method which is not contemplated under the 1993 scheme. Strong reliance was placed by the counsel for the applicant on the decision of the apex court in the case of Commissioner of Trade Tax, U.P. v. Kajaria Ceramics Ltd. reported in [2005] 141 STC 406. That decision is wholly distinguishable on facts. In that case, the dispute related to the quantum of incentives available to an existing unit undertaking expansion/ diversification/modernisation on account of additional fixed capital investment, whereas in the present c....
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....hod of granting incentives based on the increase in the production capacity of the existing unit and decided to grant incentives merely on acquisition of certain fixed capital assets and accordingly amended the 1993 scheme. In such a case, utilization of the incentives would be in respect of the total production of the finished products till exhaust on or the quantum of incentives or till the prescribed period, whichever is earlier. Even if the assessee accelerates its production on account of there being no ceiling on utilization of the incentives, there would be no revenue loss, because, once the incentives are exhausted, the assessee is bound to pay tax on the total production of the finished products. Therefore, in the facts of the present case, it cannot be said that there is illegal acceleration in the enjoyment of incentives or any loss to the Revenue. It is pertinent to note that with a view to impose ceiling on the utilization of incentives by an eligible unit under different schemes, by the Finance Act, 2001 section 41BB has been inserted into the BST Act, thereby empowering the State Government to prescribe different ratios for different classes of dealers under diffe....